SENATE BILL REPORT

SHB 393

BYHouse Committee on Judiciary (originally sponsored by Representatives P. King, Padden, Appelwick and Schmidt)

Changing provisions relating to limited partnerships.

House Committe on Judiciary

Senate Committee on Judiciary

Senate Hearing Date(s):March 26, 1987

Majority Report:  Do pass.

      Signed by Senators Talmadge, Chairman; Halsan, Vice Chairman; Bottiger, McCaslin, Nelson, Newhouse.

Senate Staff:Lidia Mori (786-7461)

                  March 30, 1987

AS REPORTED BY COMMITTEE ON JUDICIARY, MARCH 26, 1987

BACKGROUND:

In 1981 Washington adopted the Uniform Limited Partnership Act.  The act provides for the filing of a certificate of limited partnership with the Secretary of State.  In addition to other information, the certificate must state the names of general partners, limited partners, and what contributions each made.

A domestic limited partnership is required to have a registered agent who is a resident of the state and can receive service of process.  A limited partnership must include the words "Limited Partnership" in its name and may not have any word or phrase in its name that implies that it is organized for a purpose other than stated in the certificate of limited partnership.  The limited partnership is required to keep books and records available at its office for review and copying by partners.

A limited partnership is dissolved by filing a certificate of cancellation with the Secretary of State.

A person may be made an additional limited partner under the terms of the partnership agreement.  The certificate of limited partnership on file with the Secretary of State must be amended before the person becomes a limited partner.

A limited partner is not generally liable for the obligations of the limited partnership unless he or she is also a general partner or participates in the control of the business. In the latter instance, the liability is only to persons who transact business with the partnership with actual knowledge that the limited partner is participating in control.  There are certain activities that a limited partner may engage in without incurring liability.  These include: being an agent or employee of the limited partnership or an officer, director or shareholder of a general partner; consulting with or advising a general partner; acting as a surety for the limited partnership; or proposing, approving, or voting on certain matters relating to the operation of the limited partnership.

Unless the partnership agreement provides otherwise, a limited partnership interest may be assigned.

A foreign limited partnership must register with the Secretary of State and provide a statement of the general character of its business.  A list of the partners must also be submitted unless the list is included in its certificate of limited partnership in another jurisdiction.

SUMMARY:

The contents of the certificate of limited partnership filed with the Secretary of State are changed.  The certificate need only contain the names and addresses of the general partners.  The certificate need not incorporate provisions of the partnership agreement relating to the cash and property contributed by the partners or the events that lead to termination.  This information must be included in the written partnership agreement or be kept on file with other limited partnership records at the partnership offices.

The partnership must maintain an office which is located at a specific geographical location in the state.  The registered agent of the partnership must give prior written consent which must be filed with the Secretary of State and must have a specific geographical address.  If the registered agent cannot be found or if he has not been appointed, service may be made on the Secretary of State or any authorized clerk of the Secretary of State's corporation department.

A partnership must use the words "limited partnership" or the abbreviation "L.P." with its name.  The restriction on words or phrases that may be included in the name is removed.

A limited partner may participate in additional activities in the operation of the partnership without incurring the liability of a general partner.  These include:  taking any legal action permitted or required by law; requesting or attending a meeting of partners; winding up the partnership; exercising a right or power permitted to limited partners by law; or proposing or making decisions relating to the admission or removal of either a limited or general partner; a transaction involving a conflict of interest between the partnership and a general partner; an amendment to the partnership agreement or certificate; matters the partnership agreement permits the limited partners to approve or disapprove.

A creditor's ability to enforce a claim against a partner who has failed to make a promised contribution or improperly received money or other property is limited to the extent that the creditor relied on the obligation of the partner to make the contribution.

The effect of an assignment of a partnership interest is clarified.  The assignee is entitled to share in profits, losses, deductions, credits, and gains to the extent they are assigned by the assignor. 

A foreign limited partnership must register in this state, but is not required to disclose the general nature of its business.  The registration must include the names and addresses of all general partners and the address at which the names and addresses of the limited partners may be found.  The foreign domestic partnership must also promise to retain those records until the registration in this state is cancelled.

Fiscal Note:      available

Senate Committee - Testified: Andrew H. Zuccotti, Washington State Bar Association; Laura Eckert, Secretary of State's Office